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Price adjustment formula - what cut off dates can be used if the contractor is in Delay?
We have an NEC3 Option A contract with a price adjustment formula. This operates on the basis that the Contractor is partly recompensed for inflation. Partly because 15% is fixed.
Now the additional cost to the Employer due to the contract Price Adjustment (CPA) is relatively high and especially so now that the works have been delayed and the Contractor has been awarded an Extension of Time. (That is by the way).
The situation is that the Contractor is also now in delay and as a result his payments in accordance with the Activity Schedule are being processed 3 and sometimes 4 months later than planned. This results in additional outlay by the Employer for payments being made with added CPA. i should mention, that the Project is not in Europe and that inflation in the country concerned is considerably more.
The question I would like to ask is whether the Employer has the right under the NEC3 to apply the CPA to the period when payment should have been due rather than when it actually is?
Presently I can see no grounds either in clause 25 nor 50 nor 60.
Feb 5, 2015
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Reading option X1 : Price adjustment for inflation (and assuming that it has been used without amendment, although to have a fixed 15% pa it must have been to some extent) :
- I cannot find anything which says that, prior to the Completion Date, if the Contractor is delayed, whether by himself or due to compensation event, the price adjustment is altered to when he originally planned to do the work; but
- X1.2 essentially says that the Price Adjustment Factor calculated at the Completion Date is used after this date.
Have a look at X1 and search through the option Z clauses and Contract Data to see what words have been used to fix it at 15% plus any other words that maight be relevant.
Feb 5, 2015
Many thanks for that. indeed I cannot find anything relavent either and hence my question. We have no particular change to X1 - the formulae for usage in calculating the CPA is described elsewhere in the Works Information.
No, I think the Employer is stuck with it - and assuming the Contractor does finish on time, there will not really be a significant loss to the Emplyoer. If the Contractor however, is late then the LDs will apply.
Feb 11, 2015
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